Disrupting Peer-to-Peer Lending – Blockchain P2P lending Platform

Blockchain P2P Lending – People usually borrow money from a lender or a bank to start a business or for personal reasons like home furnishing, education, and automobile purchase. The borrower can either make a one-time payment at a fixed rate of interest or small installments for a certain period.

In the traditional lending process, people require intermediaries like a loan officer, underwriter, and loan processor to build the trust. But adding middlemen and regulations to the process of lending leads to the high fees.

Step 3 – Borrower creates an account

Step 4 – Borrower sends a request for the loan

After creating the account successfully, a borrower can send the loan request to all lenders around the world. Smart contracts allow borrowers to send loan requests to the lenders who are interested in the type of investment a borrower wants to make.

Step 5 – Lender interviews the borrower

After receiving the loan request, a lender interviews borrower and asks the following questions:

Why do you want to take the loan?

What is your monthly earning?

What is your repayment rate?

How many times have you applied for the loan in history?

A lender can either approve or reject the loan application based on the above set of questions.

Step 6 – Smart Contract fixes the rate of interest

If the lender approves the loan request, the smart contract decides the fixed rate of interest for different types of borrowers. The borrowers can be categorized as high-risk, medium-risk or low-risk borrowers based on their repayment rates. For example, lenders can set the low rate of interest for a low-risk borrower having good repayment rate in a smart contract. Using Peer to Peer Lending, the rate of interests remain fixed all over the world.

Step 7 – Auto-payments using Smart Contracts

Borrowers can make the payments using smart contracts embedded with a crypto-wallet. If a borrower does not pay installments timely, the smart contract adds late fees to the actual amount and upgrades it on the ledger. So, if a borrower abides by the terms of the loan, the smart contract would automatically deduct penalties.

P2P lenders using blockchain can help reduce delays, make quick approvals, eliminate the need for middlemen, and bring transparency. Blockchain-based P2P lending platforms allow investors to approve loans against residential properties, but the value of properties don’t remain stable always. Moreover, the collateral provided by the borrower is not verified by a legal authority while lending money through the P2P platform.

But the credibility can never be changed as smart contracts enable auto-payment. Companies like SALT Lending, Lendoit, and Jibrel Network have already launched peer-to-peer lending platform using blockchain and smart contracts.

If you are searching for a blockchain development company to build a blockchain-based P2P lending platform, talk to our experts and get a consultation.